How high could energy bills go next year?

Jeremy Hunt leaves 10 Downing Street in London after he was appointed Chancellor of the Exchequer following the resignation of Kwasi Kwarteng. Picture date: Friday October 14, 2022.
Chancellor Jeremy Hunt has cut short the government's Energy Price Guarantee. (PA)

Britons could be hit with average annual energy bills of between £4,000 and £5,000 next year, economists have predicted.

On Monday, new chancellor Jeremy Hunt announced that the Energy Price Guarantee – the government's plan to freeze average annual UK energy bills at £2,500 for the next two years – would end in April 2023.

The cap applies to the cost of a unit of energy rather than overall bills, so some households will pay more than that, depending on their energy use.

The scheme offers the same help to all households, no matter what their income.

Watch: Jeremy Hunt scales back energy price cap to stabilise markets

When the guarantee ends a review by the Treasury will examine whether a more targeted means tested scheme, aimed at helping lower income households, is a possibility.

In the meantime, the energy bills freeze will remain in place for another six months, helping Britons through the winter in the midst of a cost of living crisis.

The cost of living is soaring in the UK (Yahoo News UK/Flourish)
The cost of living is soaring in the UK (Yahoo News UK/Flourish)

After that, energy bills are set to soar once more, with some market researchers predicting they will double.

In the wake of Hunt's announcement, independent energy consultancy Auxilione said the average energy bill could be £5,078 per year from next April.

Global investment bank RBC Capital Markets forecast that average annual bills will be £4,684 at that time.

Market researchers Cornwall Insight predict that bills will rise to £4,347 from next April, while economic think-tank the Resolution Foundation says they will be slighter lower at £4,000.

File photo dated 03/02/22 of an online energy bill, as almost half of UK adults who pay energy bills have said they are struggling to afford them, according to new figures.
Energy bills are predicted to rise to more than £4,000 a year next April. (PA)

Banking group Investec predicted that bills will be around the same figure, at £3,923 per year for the average household.

Cutting short the energy bills freeze on Monday, Hunt said: "This is a landmark policy supporting millions of people through a difficult winter and today I want to confirm that the support we are providing between now and April next year will not change.

“But beyond that, the prime minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices."

Read more: What happens if you don’t pay your energy bills?

The energy bill relief scheme for businesses, which caps corporate energy bills, is also set to end in April.

Hunt said: "I am announcing today a Treasury-led review into how we support energy bills beyond April next year.

“The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.

“Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency."

Torsten Bell, chief executive of the Resolution Foundation, warned that middle income families as well as low income households will not be able to afford energy bills if they reach £4,000 a year in April.

Screen grab of Chancellor of the Exchequer Jeremy Hunt (left) and Prime Minister Liz Truss listen to Shadow Chancellor Rachel Reeves' response the Chancellor's statement in the House of Commons, London. Picture date: Monday October 17, 2022.
Chancellor Jeremy Hunt has torn up prime minister Liz Truss's plan for the economy. (PA)
How is the UK economy performing? (Yahoo News UK/Datawrapper)
How is the UK economy performing? (Yahoo News UK/Datawrapper)

“I think really £4,000 is so large that even middle-income households won’t be able to afford those bills next year," he told BBC Radio 4's Today programme on Tuesday.

“So he’s (Hunt) done the easy bit, scrapping the existing scheme, what he’s got to do is some hard work about how he intends to provide support for lower and middle-income households next year.”

Martin Lewis, founder of MoneySavingExpert, agreed, tweeting about energy bill predictions for April: "If these are in the right ballpark, the promised 'targeted help' will need to be targeted up into middle incomes for people to get through this.

"Especially if it stays at those levels for the next winter."

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